993 – Pros and Cons before you start: Tom talks Partnerships

SUMMARY BY CHATGPT

Main Topic: Partnerships – The Pros, Cons, and Key Considerations
Opening Notes:
• Tom promotes his free automation book and mentorship program.
• He highlights that version 3 of his automation book is now available.
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Key Takeaways on Partnerships:
Core Warning:
• “Easy to get into, hard to get out of.”
• Tom shares a personal story of a failed partnership in the 1980s that led to a $17,000 lawsuit and significant hassle.
Types of Partnerships:
1. General Partnerships – Shared liability; even a small partner might be liable for everything.
2. Limited Partnerships – General partner takes liability; limited partners’ risk is usually confined to their investment.
3. Limited Liability Partnerships (LLPs) – Variations exist, and not all states recognize them.
Advice: Always consult an attorney and accountant before entering a partnership.
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Pros of Partnerships:
• Shared financial investment can reduce the need for loans.
• Potential tax benefits (consult your accountant).
• Shared workload among partners.
• Multiple partners may make it easier to attract investors due to lower perceived risk.
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Cons of Partnerships:
• Liability risk, depending on the type.
• Not suitable for control freaks unless roles are clearly defined.
• Possible conflict and resentment, especially with friends or family.
• Lazy partners who don’t pull their weight.
• No exit strategy can lead to chaos if one partner wants out or becomes incapacitated.
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Importance of a Partnership Agreement:
• A written agreement should outline all "what if" scenarios:
o What if a partner wants to leave?
o What if a partner gets sick, dies, or is incapacitated?
o What happens during financial disputes?
o What percentage ownership does each partner have?
o Consider including buy-sell clauses and insurance options.
Bottom Line:
Plan thoroughly with professional help before entering a partnership. A well-structured agreement is essential to avoid conflict and financial disaster.
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Closing Promos:
• Mentorship: GreatInternetMarketingTraining.com
• Accredited Online School: IMTCVA.org
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Tom's Final Message:
Partnerships can be powerful and profitable—but only if you set them up correctly. Take the time to do it right.

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Episode 993 - Partnerships
[00:00:08] Welcome to Screw the Commute. The entrepreneurial podcast dedicated to getting you out of the car and into the money, with your host, lifelong entrepreneur and multimillionaire, Tom Antion.

[00:00:24] Hey everybody, it's Tom here with episode 993 of Screw the Commute podcast. Today we're going to talk about partnerships, the pros and cons, and the different types. Hope you didn't miss episode 992. That was tool tips. These are little things that pop up on your website to make it easier to navigate for people so they don't get frustrated and leave. Pick up a copy of our automation book. It's free and we're just on the cusp. I just finished editing version three, so if you happen to get version two, just email me and I'll update you to version three. But you should be getting a notice to go ahead and download version three for free because you got version two. All right. Now if you didn't get version two, get on the list. Go to screwthecommute.com/automatefree. All right. And check out my mentor program at GreatInternetMarketingTraining.com. All right. Partnerships. Here's the the conventional wisdom on partnerships that I have lived. I gotta tell you that I have lived this, that it's easy to get in a partnership, but it is can be totally crazy to get out of a partnership. And all it costs, I don't know, we were in a $17,000 lawsuit and but this was back in the 80s. I had my nightclub and I wanted to expand it. And so I made a got into a partnership with this contractor that builds houses. And he built on this part. A big part for the nightclub. And then as I'm looking at it, I mean, I grew up with building stuff and my dad and everything.

[00:02:12] I'm like, this is not safe. This is crazy. This guy's putting roof rafters at, like, I don't know, some four feet, you know, and there's a snow region, you know, and and I said, this is going to collapse on everybody. And so we started arguing about it. And I had to sue him and get rid of him. And you know, it was just a big mess, you know? So and I had to go fix all the stuff he screwed up, which is much harder to fix things that people screwed up than to do it right in the first place. So anyway, I've lived this. It's easy to get in, it's hard to get out. Okay, but we're going to go into the pros and cons. But first there's just a briefing on the types of partnerships. And again I always have to preface this. I'm not giving you legal advice. I'm giving you things to think about and pursue. If you and and in research and get a lawyer involved. If you think you want to be in a partnership because it can be a good thing, but you if you don't, if you just jump in and, you know, get your neighbor and say, hey, let's do this. Uh, the chances of success are very low. And, uh, big fight with your neighbor. Okay. So the three main types of partnerships that you run into are general partnerships where everybody has equal liability.

[00:03:36] I don't want to say that they, they have liability to the, to the partnership and any debts of the partnership. And so depending on the, you know, how you divvy up stuff, if somebody is a 90% partner and a 10% partner, I'm not really sure. But the 10% partner might be liable for the whole thing, right? So that's why you got to get an attorney involved. And then you have, uh, limited partnerships where you have a general partner and then you have people that are usually I think their liability is limited up to their investment. And then you have limited liability partnerships and you got you go on for there a couple different versions, but some states don't even approve or recognize some of the, the ones. All right. So anyway, you got to pick the type of partnership that's appropriate for what you're trying to do. And again you need to get accounting and legal advice to make that choice okay. Depending on your situation in life, see if you don't own a home and you have very little, you're just putting sweat equity into it. Well, you might not have much to lose, but if somebody had a lot of assets and and got into this partnership, they might have a lot to lose. So they might want to have a different structure to it so they don't lose everything. Okay. So anyway it's easy to get in, hard to get out. You got to pick the type of partnership.

[00:05:03] All right. So let's give some of the pros of it. Well partnerships can be good. One of the things you can do is maybe you could get into a business that you couldn't afford to do by yourself, but if you pool the money of the partners and it has to be at least two, but it could be more than two. Of course, that increases the complexity. But you pull your money and you won't have to borrow anything if you're all putting the investment in yourself. So that can be a good thing. Now there's potential tax advantages for you. Also for being in this. Again, you got to talk to your accountant about that. Another thing is shared work. So one person, if you start your own business, has to do all the work or hire employees, or in this case the work is shared between the partners. So in theory put it that way. And another thing that you might not have thought of, it's it's probably easier to, to raise money because investors when they see a one, you know, one man show or one woman show, they're like, ah, if something happens, that one person, everything goes to hell. But if there's multiple people involved, it's more secure for them that the company won't go under if something happens to any one partner. So there's some cons to it. It can be very, very, very powerful. And there's a lot of great partnerships out there. But let's jump into the con section a little bit.

[00:06:33] Okay. Well you have personal liability for the partnership depending on which method you choose, which type of partnership you chose. And I have to say it's probably not good for control freaks unless your partnership agreement, which we're going to talk about in a minute, says, okay, this partner makes all decisions of such and such, and this partner makes different decisions in a different part of the business or whatever you agree on. But if you want to make all decisions and just push your partner aside all the time, that's probably not going to do do very well and you can have conflict and resentment. Like I said, it's your neighbor and you get into a partnership and it falls apart. And now you hate your neighbor and your kids can't play together or something. Who knows how, how bad it can get. And then you might have a lazy partner. You might have a partner. That's all. Excited. I've heard a lot of these over the years of my in my students saying, oh yeah, I got into a partnership with this person, and then they didn't do crap and they wanted all they wanted their share of the money, but they wouldn't do their work, you know. So what do you do? You know, in that situation. And the biggest con is that people don't address exit strategies. Remember I said it's easy to get in, but it's hard to get out. Well, it's not as hard to get out if you have a good solid partnership agreement up front where all the expectations are on paper before you get into it.

[00:08:10] And I know that's people have trouble with that. They wanted. They're gung ho, they're excited, and they want to go and jump in. And then stuff starts happening and there's no resolution for it that's pre-planned. See? So you got to put the brakes on a little bit to get a good partnership agreement that addresses these things. And some are you know it could be a beautiful partnership. Beautiful. And then something happens and then things go crazy. For instance, let's say you have a beautiful partnership. You love your partner. You work well together. It's thriving. The business is going great. And then your partner dies or becomes incapacitated or in a car accident or something. What happens? Well, if you haven't pre-planned for this, it could be some crazy relative comes in that's just an idiot that wants to take over their position and make the decisions. And they're an idiot and they don't know what they're doing, and they're trashing the business, running it into the ground or trying to take the money, you know. So what? So these are all things that savvy people that get into partnerships think out ahead of time with their attorney. Okay. I'm high. You know, I'm not any big fan of of legal fees by any means. But there's cases there's things when you need to have an attorney involved to make sure that everything is covered.

[00:09:46] So some of the things that you need to pay attention to in your agreement and by and I'm going to emphasize, you know, Google, uh, partnership agreement issues or partnership agreement clauses and you'll see the things oh, man, I never thought of that. What if that happens? Oh, geez. I don't want it to scare you out of doing it, but I'd rather scare you out of doing it than to encourage you to do it and then run into these situations and then lose everything or, you know, lose your friends and relatives over. All right. Okay, so. So here's just a smattering of some of the things you want to think about. What if somebody just wants out. They got into it. They decided they didn't like it and they want to get out. Well, you have to have a buy sell agreement. A clause in there. What happens in that case? What happens if they may come back? If they're incapacitated? Let's say they got a real bad illness, but they're expected to come back in a year. What happens? All right. What happens to their share of the money? Does it continue? You know, but the partnership has to hire their share of the workout and pay that money out. What? What happens? And I'm not telling you what happens. You might be benevolent and very well-heeled and say, well, my partner's wonderful. I'm not going to kick him when they're down. They can get their share of the money even if they're sick.

[00:11:15] Okay. That's fine. It's just it needs to be in writing. Because again, if they had some power of attorney in there, they're in a coma or something. Then this relative comes in and tries to, you know, go crazy running the business and and hurting the business. Well, that all has to be thought out ahead of time. So it boils down to like, what ifs. What if the partner wants out? What if there's a financial dispute? How does it get resolved? What percentage of the business belongs to each partner? So it can doesn't have to be 5050 or it could be ten partners involved. You know, so what? What's the the split between them? And what about insurance or one way to to handle these situations is buy out insurance. I'm not sure if that's what it's called, but it could be insured that if something happens to one of the partners, uh, money is available bowl to keep the thing going. Or to buy them out or whatever say so. These are the kinds of things that you have to think about. And again, I don't want to scare you, but I'd rather scare you than have you tell me, hey, I listened to that episode 993 and I jumped into a part. I didn't pay attention. I jumped into a partnership, and now I'm broke and I'm homeless, and and, uh, the feds are after me, and, uh, I don't know what could happen to you, but I don't want it to happen to you.

[00:12:50] So if you're going to think about getting a partnership, look at all these things, Google all the stuff, get an attorney involved, and then, uh, and then do it right. That's what I'm saying. Because it can be really, really great for you if you do it right. It's a big if, you know, so so like I said, the partnership agreement is pretty much what ifs. What if this happens? What if that happens? What do we do about it? It's all agreed to ahead of time. Now. It still doesn't mean there's not going to be conflicts that come up in the, you know, during the course of business and, and financial pressures and all kinds of things. So, so you need to think about ahead of time. All right. So that's my story and I'm sticking to it. Check out my mentor program greatinternetmarketingTraining.com. And check out my school the Internet Marketing Training Center of Virginia. IMTCVA.org. The only licensed, dedicated internet and digital marketing school in the country, probably the world, and it's licensed to operate by SCHEV, the State Council on Higher Education in Virginia. But you don't have to be in Virginia because it's distance learning and you can log in from anywhere. You got an internet connection and get a highly in-demand skill in as little as six months. All right. Check it out at IMTCVA.org and I will catch you on the next episode. See you later.